Chapter 1132: What if the Fed raises interest rates again?

Half an hour later.

Xia Yu found that everyone had finished reading it, and almost all of them were frowning in thought.

He smiled, breaking the quiet atmosphere.

'Okay, everyone has finished reading it.'

'What are your thoughts?'

Xia Yu finished, and his gaze scanned the faces of the group.

Seeing that no one spoke up, Xia Yu directly called on a name.

This time, he did not call on the most outstanding Liu Yao, but gave the opportunity to Song Yang.

'Song Yang, you go first,'

Song Yang was slightly stunned, but then nodded, and after a moment of thought, said, 'Boss, after reading this information, two words came to mind:

'Huge pit, opportunity!'

'The debt service ratio at the end of the year in each of the five countries, Mexico, Brazil, etc., has exceeded the international warning line five times. Argentina's is the highest, nearly eight times!'

'The foreign exchange of these countries is basically dry. In the next five or six years, the foreign exchange they get from commercial exports will be enough to repay the total debt this year.'

'In particular, in August, Mexico will have a debt of more than 10 billion US dollars due for repayment.'

'Apart from European and American banks continuing to lend large sums of money to Mexico to roll over its bonds, I really can't think of any other way for Mexico to get the money it needs to repay its debts.'

'From these few examples, we can see that there are huge risks lurking in the sovereign debt of Latin American countries.'

'The outstanding debt of these countries amounts to more than 300 billion US dollars, which is equivalent to the annual gross national product of Canada, the world's seventh largest economy. If there is a crisis, it will affect all the major banks in Europe and the United States, and there will be repercussions in the global financial markets and capital markets.'

'If we mobilise funds and lurk in the stock market, foreign exchange market and other markets, we will definitely make a fortune!'

Xia Yu smiled and nodded, but instead of commenting, he looked at the others and asked, 'What do you think?

The group looked at each other.

Tang Yong pushed his glasses up and said, 'Boss, let me share my personal opinion.'

'I have been studying the economic situation in the United States and the policy direction of the Federal Reserve for the past six months.'

'In 1979, Paul Volcker became chairman of the Federal Reserve, and the second oil crisis that broke out afterwards exacerbated the economic stagnation in the United States. In order to stabilise the US economy, Paul Volcker used strong measures to curb the rise in the inflation level. In June last year, Paul Volcker raised the federal funds rate from the average level of 11.2% in 1979 to a record high of 19%, and the lending rate was also raised to 21.5%.

'Since the beginning of this year, the US federal funds rate has also remained near its historical high.

'The Fed's tight monetary policy from 1979 to the present has been unprecedented in its intensity and duration, which has caused a large amount of capital to flow out of Latin America.

'Then there are the problems of Latin American countries themselves.

'On the one hand, the borrowing rates in Latin American countries are floating, and the sharp rise in the US federal funds rate has made the economies of Latin American countries extremely vulnerable, with debt rising sharply. Take Mexico as an example, the annual interest repayments alone account for 30% of annual exports.

'After the oil crisis, the real economy around the world was greatly affected, with demand for industrial raw materials plummeting, which in turn impacted international prices of industrial raw materials, which was fatal for Latin American countries that basically rely on selling their domestic natural resources to earn foreign exchange.

'However, I think there are still many uncertainties surrounding the debt crisis in Latin American countries. It has been a year since the US Federal Reserve's monetary policy reached an all-time high, and Latin American countries have adapted to it. As long as they are willing to sell fixed assets or continue to use these mines and oil fields as collateral, they can still convert their debts into bonds to tide over the difficulties.'

'Unless the US Federal Reserve once again challenges the bottom line of the people and once again raises interest rates, causing global capital to flow back to the United States.'

Compared to Song Yang's analysis, Tang Yong's perspective is relatively broad, but also relatively conservative.

However, Xia Yu did not comment, but also smiled and nodded, then looked at the others.

'What about you?'

'Don't be afraid to speak your mind!'

'Boss...'

...

Next, everyone expressed their own opinions.

From the attitude of the boss Xia Yu, it can be imagined that he believes there is a lot of profit to be made, so the main theme has long been set, otherwise he would not have summoned them so solemnly to a meeting to discuss it.

But despite the main theme, there was a difference in how it was to be implemented, whether it was a radical or conservative approach.

Everyone tried to improve on other people's ideas or find fault with them, and to analyse the problem as comprehensively as possible, so that the boss could make a more secure decision.

It can be said that everyone's starting point was good.

Therefore, after listening to everyone's opinions, Xia Yu was in a pretty good mood.

Everyone here is not his yes-man, but an elite who knows how to think independently and dares to give advice.

Xia Yu couldn't help but feel once again that Liu Jiao and the others had changed a lot compared to a few years ago!

But that was a very good thing!

Xia Yu sat up straight, took a sip of water to clear his throat, and commented with a smile, 'Your analysis is very good. Everyone's opinions are well-founded and unique. I'm very pleased!'

Upon hearing this, everyone smiled knowingly.

Xia Yu suddenly asked, 'Let me ask you a question. Do you think that in the next few months, will Mexico choose to default on all of its debts?'

When he said this, everyone's face changed.

Total default?

That's too extreme!

You have to know that Mexico's current debt is more than 87 billion US dollars!

Although they were just discussing it, they only thought, based on the data, that there might be problems with Mexico's debt of more than 10 billion US dollars that will mature in August, and the remaining 30 billion US dollars that will mature at the end of the year, but there is still room for manoeuvre.

This is a fundamental difference from the total default mentioned by Boss Xia Yu!

'Boss, Mexico's loans are all from commercial banks in European and American countries. Even if there is a glimmer of hope, these commercial banks will respond actively and will not sit back and watch Mexico default completely, right?'

'A short-term default, and a partial default, would be enough to cause their stock prices to plummet, and it would also be enough to cause huge fluctuations in Mexico's stock market and foreign exchange market,'

Xue He suddenly said, still a little incredulous.

Xia Yu revealed an inexplicable smile and said, 'What if the Federal Reserve raises interest rates again?'

'This...'

Xue He was suddenly stunned.

Tang Yong blurted out, 'If the Federal Reserve raises interest rates again, the return of international capital to the United States will be an irreversible trend. If major European and American banks want to continue lending abroad, it will be difficult for them to do so internally!'

'At that time, this will likely become the final straw that breaks Mexico's back!'

'Of course, there is also an uncertain factor, and that is that the data only mentions that Mexico is actively borrowing money from around the world, but it does not mention how much money Mexico has actually borrowed!'

After Tang Yong finished speaking, everyone's attention once again focused on Xia Yu.